ML GLOBAL HORIZONS LP - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission File Number 0-23240

ML GLOBAL HORIZONS L.P.
---------------------------
(Exact Name of Registrant as
specified in its charter)

Delaware 13-3716393
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

c/o Merrill Lynch Investment Managers LLC
222 Broadway
27th Floor
New York, NY 10038-2510
-----------------------
(Address of principal executive offices)
(Zip Code)

609-282-6996
--------------------------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware Limited Partnership)
------------------------------

STATEMENTS OF FINANCIAL CONDITION
---------------------------------

See notes to financial statements.

2

ML GLOBAL HORIZONS L.P.
-----------------------
(a Delaware Limited Partnership)
------------------------------

STATEMENTS OF OPERATIONS
------------------------
(unaudited)

See notes to financial statements.

3

ML GLOBAL HORIZONS L.P.
(a Delaware Limited Partnership)
--------------------------------

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
For the six months ended June 30, 2003 and 2002
-----------------------------------------------
(unaudited)

See notes to financial statements.

4

ML GLOBAL HORIZONS L.P.
(a Delaware Limited Partnership)
------------------------------

NOTES TO FINANCIAL STATEMENTS
(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared without audit. In the opinion of
management, the financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the financial position
of ML Global Horizons L.P. (the "Partnership") as of June 30, 2003, and the
results of its operations for the three and six months ended June 30, 2003 and
2002. However, the operating results for the interim periods may not be
indicative of the results for the full year.

Certain information and footnote disclosures normally included in annual
financial statements prepared in conformity with accounting principles generally
accepted in the United States of America have been omitted. It is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in the Partnership's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2002.

2. FAIR VALUE AND OFF-BALANCE SHEET RISK

The nature of this Partnership has certain risks, which cannot be presented on
the financial statements. The following summarizes some of those risks.

MARKET RISK

Derivative instruments involve varying degrees of off-balance sheet market risk.
Changes in the level or volatility of interest rates, foreign currency exchange
rates or the market values of the financial instruments or commodities
underlying such derivative instruments frequently result in changes in the
Partnership's net unrealized profit on such derivative instruments as reflected
in the Statements of Financial Condition. The Partnership's exposure to market
risk is influenced by a number of factors, including the relationships among the
derivative instruments held by the Partnership as well as the volatility and
liquidity of the markets in which the derivative instruments are traded.

The General Partner, Merrill Lynch Investment Managers LLC ("MLIM LLC"), has
procedures in place intended to control market risk exposure, although there can
be no assurance that they will, in fact, succeed in doing so. These procedures
focus primarily on monitoring the trading of the Advisors, calculating the Net
Asset Value of the Partnership as of the close of business on each day and
reviewing outstanding positions for over-concentrations. While MLIM LLC does not
itself intervene in the markets to hedge or diversify the Partnership's market
exposure, MLIM LLC may urge the Advisors to reallocate positions in an attempt
to avoid over-concentrations. However, such interventions are unusual. Except in
cases in which it appears that the Advisors have begun to deviate from past
practice or trading policies or to be trading erratically, MLIM LLC's basic risk
control procedures consist simply of the ongoing process of advisor monitoring,
with the market risk controls being applied by the Advisors themselves.

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CREDIT RISK

The risks associated with exchange-traded contracts are typically perceived to
be less than those associated with over-the-counter (non-exchange-traded)
transactions, because exchanges typically (but not universally) provide
clearinghouse arrangements in which the collective credit (in some cases limited
in amount, in some cases not) of the members of the exchange is pledged to
support the financial integrity of the exchange. In over-the-counter
transactions, on the other hand, traders must rely solely on the credit of their
respective individual counterparties. Margins, which may be subject to loss in
the event of a default, are generally required in exchange trading, and
counterparties may also require margin in the over-the-counter markets.

The credit risk associated with these instruments from counterparty
nonperformance is the net unrealized profit, if any, included in the Statements
of Financial Condition. The Partnership attempts to mitigate this risk by
dealing exclusively with Merrill Lynch entities as clearing brokers.

The Partnership, in its normal course of business, enters into various
contracts, with Merrill Lynch Pierce Fenner & Smith Inc. ("MLPF&S") acting as
its commodity broker. Pursuant to the brokerage agreement with MLPF&S (which
includes a netting arrangement), to the extent that such trading results in
receivables from and payables to MLPF&S, these receivables and payables are
offset and reported as a net receivable or payable and included in the
Statements of Financial Condition under Equity in commodity futures trading
accounts.

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

MONTH-END NET ASSET VALUE PER UNIT

Performance Summary

JANUARY 1, 2003 TO JUNE 30, 2003

January 1, 2003 to March 31, 2003

The Partnership experienced gains in the currency, energy and interest rate and
losses in the stock index, agricultural commodity and metals sectors. Overall,
for the quarter, the Partnership experienced gains.

The currency forward and futures trading had the most significant gains for the
quarter. The weakening U.S. dollar was continuing to decline as it has for over
a year and the Partnership was well positioned to capitalize on its U.S. dollar
positions against other currencies. The largest gains versus the U.S. dollar
during January and February were with the Australian dollar and Canadian dollar.
In March, on hopes that the war with Iraq would be short, the U.S. dollar
strengthened and returned some of the profits earned early in the year.

Energy was a profitable sector for the quarter. With the continuation of the
strike in Venezuela, the tensions with Iraq and the cold winter, long positions
in oil and natural gas were profitable in the beginning of the year. In
February, the best performing month, natural gas prices rose nearly 40% in a
single day citing expected severely cold weather and supply shortages. The
Partnership profited from

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this event but such volatility caused many of the Advisors to reduce their long
positions. This helped the Partnership retain profits as prices declined in
crude oil and natural gas in March.

Interest rate futures were also profitable for the quarter. February had
significant gains offsetting losses in both January and March. U.S. and European
bonds rallied amid concerns of a global economic slowdown benefiting the
Partnership's long exposures. Selective long/short rate exposure globally was
the main driver to gains generated in the sector. The global fixed income
markets continued their upward climb until mid-March when expectations of a
short conflict in Iraq triggered the liquidation of many fixed income
investments hurting long exposures.

Trading in stock indices posted slight losses for the quarter. The market was
choppy throughout the quarter making trading difficult. Most indices recorded
three-month lows in January causing managers to flip positions and shorts were
initiated in most major markets. During the rest of the quarter, choppy markets
caused short positions to be covered to protect against the risk of significant
losses.

Trading in agricultural commodities posted losses for the quarter. The
Partnership held positions in sugar, livestock and the soybean complex.
Livestock markets were off in February as Russia imposed an import limit to help
its domestic production. Sugar was to blame for losses in March as prices
reversed and hit a two-month low.

The metals sector had losses for the quarter. Gold drove profits in January as
it continued its run up. The general perception of risks in the financial
markets and the geopolitical situation unfolding was the main driver for the
gold market in January. The Partnership sustained losses in February and March
as the long bias in precious metals hurt the portfolio when gold reversed its
rising trend in February and continued to decline. Gold's appeal as a safe
investment diminished.

April 1, 2003 to June 30, 2003

The Partnership realized gains in the currency and interest rate sectors and
realized losses in the energy, stock indices, metals and the agricultural
commodities sectors. Overall, the Partnership recognized gains for the quarter.

The currency sector was the strongest performer for the Partnership. The U.S.
dollar depreciated against most major currencies throughout most of the second
quarter. The currency markets judged the developments in the Middle East as
negative for the U.S. economy and trade, and the U.S. dollar sold off against
most major currencies. The U.S. dollar continued to weaken significantly during
the month of May when Treasury Secretary Snow indicated he was comfortable with
current declines and that a cheaper U.S. dollar would increase exports. The U.S.
dollar strengthened against most major currencies late June, reversing some
earlier profits.

The interest rate sector generated strong gains during the second quarter
producing significant profits in May. After a mixed start in April, the bond
market rally continued through May despite the stock market recovery. The U.S.,
European and Japanese bond markets reached new highs in June, as investors were
convinced the Federal Reserve would cut short-term rates by 50 basis points.
U.S. fixed income markets were disappointed with the size of the rate cut by the
Federal Reserve and by the realization that further rate cuts would remain far
in the future. Economic news out of the Eurozone confirmed economic stagnation.

The energy markets produced a small loss for the quarter. In April and May, the
markets were dominated by the developments in the Middle East, especially OPEC's
reaction to the developments in Iraq. Production was not being resumed as
initially estimated even though the destruction of the oilfields was

7

smaller than expected. The SARS epidemic was expected to reduce the demand for
jet fuel, which the markets extrapolated to affect crude oil prices. Natural gas
was very volatile during June.

Trading in stock indices posted losses for the second quarter. The U.S. and
European markets outperformed the Asian/Pacific markets during in May. Short
positions in Europe and the U.S. were covered as the equity markets staged a
postwar recovery, causing exposures to flip from long to flat after losses were
realized. Gains were generated in trading the DAX and various Pacific-rim
indices during June.

The metals sector generated losses this quarter. Short positions in base metals
and precious metals contributed to losses in the sector. Gold generated losses
in June reacting to a U.S. dollar sell off.

Trading in agricultural commodities produced the largest loss for the second
quarter. The sector posted gains in April, mainly from soybeans, which rallied
due to revisions in crop estimates and weather overseas. Supply and demand drove
the livestock market to slightly higher volatility levels in June, creating
losses that offset earlier gains in the quarter. Losses were posted in the
livestock, oil seed and grains.

JANUARY 1, 2002 TO JUNE 30, 2002

January 1, 2002 to March 31, 2002

Trading in the energy markets was the only profitable strategy for the
Partnership in the quarter. Natural gas short positions benefited from mild
weather in the United States. Large gains were posted in March on fears of
increased conflict in the Middle East potentially causing a shortage of oil
supply.

Losses were sustained in the metals sector. Short positions in base metals and
long positions in precious metals suffered losses. Base metals prices soared on
the hope that an economic recovery in the United States would boost demand.
Precious metals declined as the U.S. economy showed signs of stabilizing and
inflation concerns waned.

Stock index trading was unprofitable. Long equity exposures resulted in losses
from choppy market conditions as profit forecasts fell short and concern over
the Enron accounting scandal continued to grow. Large price swings in the U.S.
equity markets created a whipsaw environment, causing the Advisors to flip
exposures numerous times, yielding an end result of negative performance. Global
equity markets appreciated in March, notably Japan, Germany and France,
generating losses on short positioning.

Losses were realized in the interest rate markets. Conflicting economic reports
prompted the Advisors to alternate exposures from long to short in most major
international bond markets. European fixed income exposures posted losses under
particularly direction-less markets. Global bond prices declined on growing
optimism for a stronger economic outlook for the remainder of 2002.

Trading in the agricultural commodities resulted in losses. Uncertainty in the
global marketplace prevailed, making for extremely difficult trading conditions.
Most of the losses for the sector were attributed to short coffee positions.
During January and February, coffee had been in a downward trend. This trend
sharply reversed in March as Mexico and Central America reduced exports, causing
lower inventories of exchange-approved soybeans in U.S. warehouses. Coffee
futures rallied from 46.71 cents per pound to 58.48 cents per pound.

8

Currency trading also sustained losses. With the exception of the Canadian
dollar, all of the futures traded currencies appreciated against the U.S.
dollar. The momentum in the U.S. dollar and Japanese yen trade reversed,
generating significant losses. Relative volatility continued for the G-7
currencies in March.

April 1, 2002 to June 30, 2002

Profits resulting from trading in the currency sector provided the Partnership
with the majority of its gains in the second quarter. The decline in the U.S.
dollar continued through June unabated fueled by the decline in the U.S. equity
markets.

The interest rate sector was profitable for the Partnership despite its slow
start. Yields on major debt-instruments continued to decline. U.S. fixed income
markets have rallied sharply due to the flight-to-safety effect as well as the
conviction that the U.S. Federal Reserve will raise rates later rather than
sooner.

The trading in stock indices found profits from its short positions. The
strength of U.S. economic data continued to surprise on the upside, pointing
toward a stronger recovery than expected, but the equity markets have remained
weak.

The agricultural commodities sector posted small gains for the quarter. Strong
gains were posted in livestock and grains in April as prices trended downward.
Some of the gains were lost in June as livestock prices began to rise. The
continued weakness in the U.S. dollar and low stockpiles in grains and soybeans
should aid in sustaining a price rally in the summer months.

The metals sector sustained slight losses for the quarter. In June, the uptrend
in gold and silver reversed and losses were sustained on long positions
eliminating profits earned earlier in the quarter.

Energy futures experienced whipsaw markets and trading brought in losses for the
Partnership. The market was volatile during the quarter due to continued turmoil
in the Middle East.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

Item 4. Controls and Procedures

Merrill Lynch Investment Managers LLC, the General Partner of ML Global Horizons
L.P., with the participation of the General Partner's Chief Executive Officer
and the Chief Financial Officer, has evaluated the effectiveness of the design
and operation of its disclosure controls and procedures with respect to the
Partnership within 90 days of the filing date of this quarterly report, and,
based on their evaluation, have concluded that these disclosure controls and
procedures are effective. Additionally, there were no significant changes in the
Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

9

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending proceedings to which the Partnership or MLIM LLC
is a party.

Item 2. Changes in Securities and Use of Proceeds

(a) None.
(b) None.
(c) None.
(d) None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) EXHIBITS

There are no exhibits required to be filed as part of this report.

(b) REPORTS ON FORM 8-K

There were no reports on Form 8-K filed during the first six months of
fiscal 2003.

10

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

ML GLOBAL HORIZONS L.P.

By: MERRILL LYNCH INVESTMENT
MANAGERS LLC
General Partner

Date: August 14, 2003 By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Executive Vice President, Chief Investment
Officer and
Managing Director - Alternative Strategies
Division
(Principal Executive Officer)

Date: August 14, 2003 By /s/ PATRICK HAYWARD
-------------------
Patrick Hayward
Chief Financial Officer
(Principal Financial and Accounting Officer)

11

EXHIBIT 99

Form of Certification Pursuant to Section 1350 of Chapter 63
------------------------------------------------------------
of Title 180 of the United States Code
--------------------------------------

I, Fabio P. Savoldelli, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ML Global Horizons
L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: August 14, 2003
- -----------------------

By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Executive Vice President, Chief Investment Officer and Managing Director -
Alternative Strategies Division
(Principal Executive Officer)

12

EXHIBIT 99 (a)

AS ADOPTED TO
-------------
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------

In connection with this quarterly report of ML Global Horizons L.P. on Form 10-Q
for the period ended June 30, 2003 as filed with the Securities and Exchange
Commission on the date hereof, I, Fabio P. Savoldelli certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant of the Sarbanes-Oxley Act of 2002,
that:

1. This quarterly report fully complies with the requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in this quarterly report fairly presents, in all
material respects, the financial condition and results of operations of ML
Global Horizons L.P.

Date: August 14, 2003
- -----------------------

By /s/ FABIO P. SAVOLDELLI
-----------------------
Fabio P. Savoldelli
Executive Vice President, Chief Investment Officer and Managing Director -
Alternative Strategies Division
(Principal Executive Officer)

13

EXHIBIT 99

Form of Certification Pursuant to Section 1350 of Chapter 63
------------------------------------------------------------
of Title 180 of the United States Code
--------------------------------------

I, Patrick Hayward, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ML Global Horizons
L.P.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies, in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: August 14, 2003
- -----------------------

By /s/ PATRICK HAYWARD
-------------------
Patrick Hayward
Chief Financial Officer
(Principal Financial and Accounting Officer)

14

EXHIBIT 99 (a)

AS ADOPTED TO
-------------
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
---------------------------------------------

In connection with this quarterly report of ML Global Horizons L.P. on Form 10-Q
for the period ended June 30, 2003 as filed with the Securities and Exchange
Commission on the date hereof, I, Patrick Hayward certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant of the Sarbanes-Oxley Act of 2002, that:

1. This quarterly report fully complies with the requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934; and

2. The information contained in this quarterly report fairly presents, in all
material respects, the financial condition and results of operations of ML
Global Horizons L.P.

Date: August 14, 2003

- -----------------------
By /s/ PATRICK HAYWARD
-------------------
Patrick Hayward
Chief Financial Officer
(Principal Financial and Accounting Officer)

15